MOHAN BRERWEIES LTD Vs. STATE OF UTTAR PRADESH

JUDGEMENT

(1.) THE petitioners are distillers manufacturing alcoholic liquors and rectified spirit. In these petitions under Article 226 of the Constitutions, they have challenged the levy of the duty under the nomenclature export duty on Indian made foreign liquors, country spirits, beer and rectified spirits levied at the point of export from Uttar Pradesh to other States and Union Territories in India. The petitioners have also prayed for quashing the notifications issued by the Government of Uttar Pradesh under Ss. 28 and 29 of the U.P. Excise Act, 1910, (hereinafter referred to as the Act) levying such duty on such liquors and rectified spirit exported from Uttar Pradesh to other States and Union Territories.

(2.) THE petitioners case is briefly as follows : Before the commencement of the Constitution, the State of Uttar Pradesh was levying a duty on export of Indian made foreign liquors country spirit and beer at very low rates. This duty was levied to meet the expenditure on supervision and control of export of liquors. Even after the commencement of the Constitution, the rates of export duty continued to be the same except that such rates were expressed in decimal coinage. The Government has by stages increased the rates of export duty enormously. Such increase in the rates of export duty has seriously affected the petitioners trade in exporting alcoholic liquors. The present rates of export duty cannot be justified as fee because the State Government does not render any service to the petitioners in return for such export duty. Besides export duty, the petitioners required to pay a duty on manufacture of liquors called the still head duty, which is payable before issue of such liquors from their distilleries. The payment of still head duty is governed by Rules 152 and 153 of the U.P. Excise Rules. Neither the Constitution nor the Act empowers imposition of export duty on liquors and rectified spirit. If export duty is allowed to be charged by this State, the same liquors will be taxed twice over. Export duty on liquors is also violative of Article 301 of the Constitution inasmuch at it impedes free flow of trade and commerce in such liquors. In accordance with the decision taken at the Conference of Finance Members of Various Provinces held in the year 1923 excise duty on liquors should follow consumption and can be charged only by the respective States in which liquors are consumed. If export duty is allowed to be charged on such liquors, there would be levy of excise duty on them twice over and this would be manifestly illegal.

(3.) IN the counter affidavit filed on behalf of the State levy of export duty on liquors is sought to be justified as follows : The petitioners are not required to pay to this State still head duty upon liquors which exported by them to other States and Union Territories. Upon liquors so exported they have to pay excise duty under the nomenclature of export duty. Excise duty in the form of still head duty is payable by the petitioner only on such quantities of liquors which are issued by them for consumption within this State. Under Entry No. 51 of List II of the Seventh Schedule to the Constitution, this State has competence to levy excise duty on liquors which are manufactured or produced in this State Since liquors exported to other States and Union Territories by the petitioners are admittedly manufactured or produced in this State, it (this State) can validly levy excise duty on them at any convenient stage after such manufacture and this state has been levying on such liquors which are exported to other States and Union Territories, excise duty under the nomenclature of export duty. What is charged by the importing States and Union Territories on such liquors is countervailing duty the levy of which is permissible under Entry No. 51 of List ii of the Seventh Schedule to the constitution. So far as this State (Uttar Pradesh) is concerned, it is charging excise duty only once in the form of export duty on liquors so exported. Such levy of excise duty under the nomenclature of export duty, is not in any manner violative of Article 301 of the constitution. It is not true that after the enhancement of the rates of export duty on liquors under the impugned notifications there has been any decrease in the export of liquors from this State.